News & Updates

The Reason for School Referenda

by | Oct 20, 2016 | Economy, Taxes

The Fall season is in full swing. Leaves are dropping, there is a chill in the air, and school district referenda are on the ballot. Next month, 32 Minnesota school districts will hold operating referenda, while a number of other districts will hold capital project and building bond referenda.

[Correction, 10/25/16: 31 operating referenda are scheduled to be on the ballot on November 8. Three districts will have two questions on the ballot, so the number of districts holding operating referenda in November is 28, not 32.]

Nearly all school districts rely on referendum revenue to cover part of the cost of education. According to non-partisan House Research staff, only three of the approximately 330 Minnesota school districts do not have any referendum revenue in the current fiscal year (FY 2017). (One of these three districts—Pine Point—is unique in that it has no tax base and thus cannot have a property tax referendum levy.) In fact, the use of referenda to finance school operations has become so common that state policymakers have authorized Minnesota school districts to levy referendum revenue of $300 per pupil without seeking voter approval.

One reason school districts put referenda on the ballot is that the state funding they receive has not kept up with inflation. The graph below—based on Minnesota Department of Education (MDE) 2016 end-of-session data—shows the change in state operating aid to Minnesota school districts since FY 2003 in constant FY 2017 dollars per pupil.* (FY 2003 is the year of the state takeover of school general education costs and thus is an appropriate baseline year for this analysis.)


From FY 2003 to FY 2012, state operating aid to Minnesota school districts declined by nearly $2,000 per pupil in constant FY 2017 dollars. Largely as a result of funding increases enacted during the 2013 legislative session, nearly half of this revenue loss had been restored by FY 2017. However, total per pupil state operating aid to school districts is still nearly $1,100 (10.2 percent) less than it was in FY 2003. This decline in state aid has been a driving force behind efforts to enact school operating referenda, as school districts strive to replace a portion of the decline in state aid with local property tax dollars.

Unfortunately for many Minnesota school districts, the increase in operating referenda and other property tax increases have not been sufficient to replace the decline in state aid. An April 2016 North Star report revealed that over half of Minnesota school districts have less real (i.e., inflation-adjusted) per pupil operating revenue today than they did in FY 2003. To compound their financial plight, school districts have new funding responsibilities in FY 2017 that they did not have in FY 2003, such as all-day kindergarten and expanded services for pre-kindergarten children. In addition, many districts have increased concentrations of students with limited English proficiency and other special needs which result in increased district expenses.

As noted in the report, the decline in real per pupil state operating aid since FY 2003 is the principle reason for the decline in real per pupil school operating revenue among the majority of Minnesota school districts and for the expansion in the number of school referendum levies over the last fourteen years. The number of districts with declining real per pupil revenue and the magnitude of that decline would have been much greater without the revenue provided by school operating referenda.

The fate of the 32 school operating referenda and other school ballot questions will be decided at the polls on November 8.


*The conversion from nominal (i.e., unadjusted for inflation) to constant 2017 dollars in this article is based on the implicit price deflator for state and local government purchases. The use of this implicit price deflator was the subject of a recent North Star article. Per pupil amounts are calculated using adjusted average daily membership.

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